Having existed for more than two decades under its former name, this Canadian closeout retailer believes rebranding is just the latest step in shoring up its extreme value business model. It takes a lot of gusto to ditch an established brand identity, even for one closely tied to the original moniker. At the Canadian closeout retailer LW (formerly Liquidation World), the decision to change the name of the store was about appealing to a wider customer base without alienating the long-time customers.

Considering the value proposition of shopping at an LW hasn’t changed, this rebranding strategy may be one of the best moves in the company’s history.

“The stores have built a loyal following, but there wasn’t a lot of emphasis on the look of the stores or merchandising presentation,” said Seth Marks, president and CEO. “The name also resonates well on the vendor side. We put our vendors on a pedestal, and our new name doesn’t carry any negative connotations.”

Founded in 1986, the company now has around 100 stores, opening five new locations in the last year. The LW merchandise mix is based on acquiring items through closeouts and receiverships, offering extreme values on everything from consumables and furniture to everything in between.

More than just a name

Part of completing the process of rebranding includes making significant changes to its current footprint. It is first concentrating on renovating its A and B stores, the top performers in the portfolio. Marks said the company is changing from a scattered merchandising methodology into one with clear flow and categories. Stores are being made brighter with lowered profiles so customers can see the whole store instead of a cluttered space with big gondolas. There isn’t a set timetable for the completion of what Marks called an ongoing process.

“In 2009, we went through a discovery and test year; we are executing on what we learned this year,” he said. “We’ve hired people to lead our new allocation and planning so we can turn B stores into A stores and C stores into B stores, and we’ll first make all the Bs and As into LWs.”

Another part of laying the groundwork for the future of the company involves re-examining its footprint. Previously, there were several Liquidation World stores in the US, all in the state of Washington. Three of those stores were closed in the second quarter of 2009, and the last store in Spokane was just closed this spring, making LW is now 100% based in Canada.

In addition, LW expanded its distribution center from 200,000 square feet to 600,000 square feet to support more growth in Ontario. That is the largest province in Canada, and Marks said LW’s presence there needs to be built up. In fact, LW locations could be in position to sprout up around the country. Many prime retail locations have opened up thanks to the recession, and LW is seen as a destination retailer that adds value for landlords because of the company’s status as the largest closeout retailer in Canada.

“We have no presence in Ottawa, and there is significant room for us to grow in Toronto, Winnipeg, Edmonton, Calgary, and Vancouver as well,” said Marks. “Now we have the opportunity to go into some great locations.”

Finding better deals

Marks became the leader at LW a little more than a year ago after the liquidation and turnaround fund he was a part of took over the company. The first order of business was to get the company back to the basics of running an extreme value operation. Last year, LW ran with materially less inventory than the previous year by flushing out legacy inventory and reducing its SKU count. That allowed the company to move out older products and begin the process of sourcing goods based on better buying habits.

Not only is this approach meant to be more successful with consumers, it is meant to attract vendors as well. Marks said many of LW’s vendors are Fortune 500 consumer companies that need to strategically move excess and obsolete inventory. Many US retailers enjoy the fact that LW is entirely based in Canada, allowing them to move products quietly outside their core markets.

One perfect example of the opportunities LW is looking for came after the apparel chain Steve & Barry’s out of bankruptcy decided to liquidate its holdings by early 2009. LW moved $20 million of merchandise from Steve & Barry’s distribution center, clearing it out in two weeks and selling the majority of the items through LW locations.

As the recession eases, one of the biggest issues confronting LW is how to maintain customer relationships with new shoppers. Marks believes the recession was almost like an infomercial for the extreme value concept. Although Canada didn’t feel the economic sting as badly as the US, consumers have gone through an educational period where value is now seen as king. At the same time, the rise in e-tailing means people now have a greater ability to find deals and comparison shop. Given the choices in front of today’s consumers—visit extreme discounters like LW, shop online, or risk overpaying at a traditional outlet—Marks likes his company’s chances of a high rate of customer retention, even after the economy is running smoothly.

This means consistently delivering a sustainable flow of compelling deals with a core base business around branded consumables. LW is working on making sure its stores carry the basic products customers depend on and augmenting that with extreme bargains. LW is now growing its SKU count with Fortune 500 consumables companies, building up inventory after selling it down in 2009. By finding the exciting one time deals and putting them alongside the closeout, excess, and obsolete items, LW has created a business model that works for vendors and consumers alike.

“What has been great is building long-term relationships with shoppers as well as with companies that want to deal with one outlet for closeouts that isn’t in their core market,” said Marks. “Our new tagline is ‘Everybody’s Outlet Store,’ and our customers and vendors have all seen the value we provide.”